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Next, jot down how much of your money monthly income goes towards essential spending.

Categorise these payments, so you have a good idea of where your cash is going. Your categories could include mortgage payments, utility bills, groceries, childcare, travel etc.

Gather your bank statements, household bills and credit card bills for this task. The more accurate your figures are, the more useful your budget will be.

Calculate your total expenditure for each of the last three months – and subtract this from your monthly earnings. This will show you how much is typically left for ‘non-essential’ spending each month.

4 Review your disposable income

Previous three months

REGULAR INCOME

Jan

Feb

Mar

Average

Salary

£2,294

£2,294

£2,294

£2,294

Rental income

£450

£450

£450

£450

Savings interest

£55

£58

£61

£58

Freelance income

£150

£50

£200

£133

TOTAL

£2,949

£2,852

£3,005

£2,935

ESSENTIAL SPENDING

Jan

Feb

Mar

Average

Mortgage payments

£780

£780

£780

£780

Utility Bills

£299

£278

£303

£293

Groceries

£500

£410

£510

£473

Car

£200

£180

£170

£183

Gym

£85

£85

£85

£85

Childcare

£450

£410

£450

£437

MONEY SPENT:

£2,314

£2,143

£2,298

£2,252

MONEY LEFT FOR DISPOSABLE INCOME:

£635

£709

£707

£683

DISPOSABLE INCOME SPENDING

Jan

Feb

Mar

Average

Cigarettes

£60

£55

£80

£65

Alcohol

£65

£90

£54

£70

Football

£90

£110

£45

£82

Going out/leisure

£195

£150

£210

£185

Savings

£200

£200

£200

£200

Other

£124

£95

£99

£106

DISPOSABLE INCOME SPENT:

£734

£700

£688

£707

MONTHLY BALANCE:

-£99

+£9

+£19

-£24

An accurate review of how you’ve previously spent your disposable income will prevent you from under or over-budgeting in certain areas.

Note how you’ve spent your disposable income in the previous three months. If you put money into savings, note down how much money you store away each month too.

At this point, you may discover you’re regularly spending more than you earn. If this is the case, making a budget is a crucial task that shouldn’t be put off.

With an accurate picture of your average spending now at your fingertips, it should be easy to draw up a monthly budget you can stick to.

Use your average earnings and compulsory spending figures for the last three months to estimate how much disposable income you’ll have in future months, adding in any one-off payments you know are on the way.

From there, you can set a reasonable budget for your disposable income, along with achievable savings targets.

In the example above, our budgeter has planned to put an extra £50 into savings in April, simply by budgeting £15 less a month than average in each other category of his disposable spending.

He’s also budgeted an extra £55 for his car’s MOT by removing an extra £55 (£70 total) from his ‘going out/leisure’ fund for that month.

6 Keep an eye on your spending and roll with the punches

Once you’ve drawn up your budget, it’s important to keep an eye on how faithfully you’re sticking to it and adjust your limits accordingly.

We’d recommend revisiting your budget each month. This way, if you’re continuously overspending, you’ll notice quickly and will be able to readjust before it affects your financial goals too drastically.

A lot of people find it simpler to manage their budget using spreadsheets or personal finance software. Check our personal finance software reviews to see what these programs could do for you.